Posted by: Josh Lehner | September 27, 2016

Peak Renter In Real Life

A year ago our office asked “Is 2015 Peak Renter?” We laid out a straightforward case examining the three main underlying drivers for the shift into rentership over the past decade: household finances, demographics, and preferences and tastes. We know the pendulum has swung all the way toward rentership. The question is not whether or not it will swing back toward ownership, it will. The question is when will this happen. Our office’s position was that it would happen probably sooner than the conventional wisdom suggested. The reason was household finances and demographics are now working in favor of ownership.

Overall that piece got a lot of attention. Bill McBride of Calculated Risk even talked about it on one of his Bloomberg TV appearances (thanks Bill!). I also think it is fair to say that our work was greeted with a healthy amount of skepticism as it does when we discuss it in our presentations.

Well, the 2015 ACS data was just released and we got an update on the question of ownership vs rentership. As Jed Kolko notes in his great summary of the ACS data, rentership ticked up 0.1 percentage points nationwide last year. So not yet peak renter across the entire U.S. and the HVC data differ from the ACS data as well. That said, the U.S. changes were minimal, suggesting the shift into rentership has slowed considerably; possibly an indication that peak renter is near.

Locally, however, peak renter is already here. Statewide the homeownership rate ticked up from 60.7% in 2014 to 61.1% in 2015. In the Portland metro region the increase was even bigger at 1.6 percentage points.

pdxowner0515

Yes, it is just one year. One data point does not make a trend. It is possible that some of this increase will be given back in the 2016 data. However decomposing the ownership gains by age reveals an interesting pattern. This is what peak renter looks like in real life (IRL). The 20- and 30-somethings are seeing the largest ownership increases. The vast majority of these households rent (~80% renter in early 20s, dropping to 50/50 in mid-30s) but on the margin ownership is coming back somewhat.

pdxownerage1415

Now, how pervasive are these gains across the nation? Is this just an anomaly or can we chalk it up to noisy data? In short, no or at least probably not. Looking at the nation’s 100 largest MSAs — the same 100 that we studied in the Housing Trilemma — shows that half of them saw their ownership rate increase in 2015. This is considerably more than the 20 or so that saw yearly gains during the Great Recession and its aftermath. Those 20 are probably more about noisy data than any real return toward ownership.top100ownership

When decomposing ownership gains by broad age group, the largest metros show a similar pattern in that more are seeing increases among the younger cohorts. Some of this is due to composition effects where household formation among the young is suppressed as more are living at home. This influences the potential young renter households more.

top100increases

However, the issue is not the magnitude of the changes but the direction.  As we argued last year, two of the three main reasons for the increase in rentership — household finances and demographics — are swinging back in favor of ownership in recent years. And expected to continue to do so. The third main reason — preferences and tastes — remains more of an open question.

As for the outlook, our office expects ownership to continue to increase somewhat in the coming decade. Just how far is uncertain. We are not likely headed back to 2007 ownership rates, nor should we. The large transaction costs associated with buying a home and the lack of flexibility is not for everyone or for every household. However the pendulum had swung all the way in the other direction in the past decade. More balance is likely to be seen moving forward.

It is also worth noting that in growing metropolitan areas like Portland, the overall number of renters and owners will both increase. There will be more of everybody. The challenge is ensuring the housing supply keeps pace with demand, which has not happened in recent years. Affordability has eroded considerably as a result.

Posted by: Josh Lehner | September 22, 2016

Household Growth by Income (and Housing)

Our office talks a lot about migration and population growth. It is one of the key reasons Oregon outperforms during economic expansions. However, the changing composition of the economy and households underneath the topline has a big impact. This is particularly true when it comes to the housing market in recent years. A year ago, in work I was doing ahead of a presentation for Multifamily Northwest, I detailed how job polarization was also impacting household growth by income in Portland. At what incomes levels were we seeing the growth? However this not just a Portland story, it is seen throughout much of the state.

Yesterday, Mark and I gave a housing overview presentation to the House Revenue Committee. We tried to hit all the high notes and the big picture supply and demand trends we are seeing. However on the household growth by income level chart there was a bit of confusion and I want to clarify what I was trying to say. This is because I think this growth is one of the key aspects underlying the current housing market. This is important and I failed to properly communicate what I wanted to yesterday.

First I should have started with a graph that looks at the number of households by income level. The three largest groups of households in Portland are the three income groups below $75,000. This, of course, make sense given median household income is $64,850 per the latest ACS data. As such, 58% of households in Portland earn $75,000 or less per year.

pdxhhinc15

However, the story is different when you look at the net change in the number of households by income level in the past decade. On net, when you compare the composition of households in 2015 to the composition of households in 2007, all of the growth has been at the top end of the income spectrum. So even as these higher income households represent a minority of the overall population, they represent the majority of the growth.

This has big implications for housing. These higher income folks can afford higher housing costs. The rough affordability numbers listed below use the ballpark rule of thumb that housing should not exceed 30% of income, even as that is an imperfect measure. A household earning $100,000 per year can afford $2-3,000 per month in rent or to purchase a $500,000 home. Most Portlanders and Oregonians cannot of course. So when the conversation turns to the fact that we are only seeing new construction as these luxury price points, it is not just because margins for developers are better at higher prices. They are of course. However they are also responding to a fundamental shift in where the demand for housing is coming from, namely, from the higher income households. That does not mean we do not need more housing at lower price points; we desperately due. And a large part of our office’s focus yesterday was trying to look at the broken supply side of the housing market. We are also working on drafting up some of our comments along those lines.

pdxhhincchange0715

Below is a similar chart but looking at the Eugene MSA (Lane County). The same general pattern is seen and this is actually what we showed yesterday, not the Portland data. Notice that the housing affordability numbers do not change. That is because it is based on the 30% rule of thumb.eugenehhincchange0715

Like Mark said yesterday, housing affordability is not just an urban problem today and it certainly is not just a Bend, Hood River and Portland story. Rural affordability has many challenges as well. Representative Bentz asked us to follow-up on some of our rural comments and charts and we will do so in the near future.

 

Posted by: Josh Lehner | September 20, 2016

Household Income Growth by Quintiles

Noted in yesterday’s look at how median household incomes are finally rising was that, at least nationally, the lowest incomes increased by the largest amount. That was based on the CPS data available for the U.S. In the ACS data, which we have at the local level you can do something similar as well, which brings us to the latest edition of the Graph of the Week.

In 2015, incomes for Oregonians in the bottom quintile — the 20% of households making approximately less than $23,000 per year — increased by the largest percent. This amounted to nearly a 7 percent increase after accounting for inflation. Gains were relatively even for the rest of the income distribution. In fact this pattern of strong gains at the bottom end, plus relatively even gains for everyone else is seen in Oregon data since the depths of the recession, or so far in recovery. These gains are predominantly due to the improving labor market where wage gains are increasing as the market becomes tight.

However, when looking at income changes from before the Great Recession through today, there is a clear pattern. Those at the highest income levels have seen the best performance. Inflation-adjusted incomes for the top 20% are now back to where they were in 2007. The top 5% have fared even better with gains of 1.3%. On the other hand, incomes for the bottom 20%, even after the big jump in 2015, remain 12% below where they were in 2007.

hhincgrowth0715

Our office is still unpacking and dissecting the latest data. Stay tuned for more updates in the coming weeks.

Posted by: Josh Lehner | September 19, 2016

Oregon Median Household Income Rises (Finally)

The big economic news last week wasn’t our office’s forecast, but the big jump in median household incomes nationwide. Two separate reports showed two different numbers: the Current Population Survey gains were 5.2% and the American Community Survey gains were 3.8%. The big takeaway isn’t the differences but the strong growth seen in both. The recovery is finally translating into income gains for the majority of households. In fact, per the CPS data, the largest percentage increases in incomes were seen at the lower end of the income spectrum. This coincided with a relatively large decline in the poverty rate as well, as would be expected. Overall certainly good news and a welcome reprieve from lackluster to declining incomes in recent years. What is driving the results? I’ll let Jed Kolko, writing at Calculated Risk, explain:

Most of the jump in median household income, therefore, appears to be rising earnings, with rising employment playing an important supporting role. The labor market improved for workers on both of these fronts: the rise in median household income is indeed good news.

ACS data was also released for state and local jurisdictions* and the Oregon data looks even better. From 2014 to 2015, Oregon’s median household income grew by 6%, the third fastest rate in the nation behind Montana and Tennessee. The poverty rate dropped by more than a percentage point as well. However, from 2007 to 2015 Oregon’s median household income gains rank just 32nd best among the states and DC. And even with the poverty improvements, the state is only about halfway back down to pre-Great Recession poverty rates. Still, progress is being made and the gains are seen throughout most of the state as well.

Below is an update to our office’s graph comparing median household incomes for Oregon and the U.S. The 2015 gains mean Oregon’s median household income is 2.9% below the U.S. median, which is more in-line with the typical year where our incomes trail the nation by 2-3%. In inflation-adjusted terms, Oregon’s income in 2015 is about 1.5% below 2007 levels and 2% below 1999 levels, at least when using the PCE deflator. Using different deflators or measures of inflation will change those percentages, sometimes drastically so.

medianhh15

In recent years our office has been hitting on the major theme that robust job growth in Oregon has translated into solid wage gains as well. This is not the case nationally. It terms of the data, it was more a matter of time before the stronger Oregon labor market translated into median household income growth and lower poverty rates. 2015 is a start. Given the ongoing economic strength, 2016 is shaping up to be even better. A key question for the outlook is whether or not the economy can get fully healthy before the next recession. This did not happen in the housing boom. The cumulative progress made since 2009 or 2010 has actually been very significant even if year to year changes are muted. Full employment is now within sight, although not here yet. Broader gains across the board are now being seen, however incomplete they may be thus far.

* All of the 2015 ACS published tables are now available. Our office is working on dissecting the latest data and updating our records. The good news we have new data (yay!) the bad news is we have new data (have to update everything…). The microdata won’t be available for another few months. Then the real work begins when we can crunch the underlying sample data.

Posted by: Josh Lehner | September 14, 2016

Oregon Economic and Revenue Forecast, September 2016

This morning the Oregon Office of Economic Analysis released the latest quarterly economic and revenue forecast. For the full document, slides and forecast data please see our main website. Below is the forecast’s Executive Summary.

The economic expansion continues. However a few mounting concerns muddy the outlook with risks clearly tilted toward the downside. The good news is the nation continues to muddle through various headwinds with job growth strong enough to bring down headline unemployment and make some progress on underemployment. The strengthening labor market, better wage gains and strong household balance sheets continue to support the U.S. consumer, the only real economic bright spot in the past eighteen months.

Even so, there are a number of worrisome trends that have emerged in the data that should give forecasters pause. First, manufacturing and industrial production continues to be weak. Second, personal income growth nationwide is slowing. Third, due to slowing tax revenues, an increasing number of state revenue forecasters are missing their forecasts. Fourth, the dearth of new business investment is weighing on growth. All told, even with these concerning trends, the baseline outlook still calls for the expansion to continue. And while expansions do not die of old age – they die due to mistakes – the economy is clearly closer to the next recession than not.

While some U.S. data is slowing, Oregon’s expansion continues to see full-throttle rates of growth. Oregon is outpacing the typical state by a considerable margin today for both job and income gains. This growth differential largely comes from the state’s underlying fundamentals like its industrial structure and strong in-migration flows. Both of these trends have long-lasting impacts on the Oregon economy and help drive the state’s more volatile swings over the business cycle.

helpwanted0816

Oregon’s General Fund revenue outlook remains stable. Personal income tax collections continue to expand at a healthy pace, keeping revenues in line with what was expected when the budget was drafted. Oregon’s General Fund revenues are currently expected to end the biennium within 0.1% of the Close of Session forecast.

Personal income tax collections continue to reflect Oregon’s strong underlying labor market.  Withholdings out of paychecks expanded at an 8% rate during fiscal year 2016.  As such, state revenue growth in Oregon remains among the strongest in the U.S.  State revenue growth would have been even more rapid in recent months if not for the payout of the personal income tax kicker generated during the 2013-15 biennium. The vast majority of kicker payments have now been made, and will no longer weigh on overall collections.

with0916

In contrast to the healthy growth seen in personal income tax collections, corporate tax collections have been falling sharply in recent months. Nationwide, corporate profits have taken a step back, largely due to rapid appreciation of the U.S. dollar and struggles among energy firms and other commodity producers.  Even so, profits and corporate tax collections remain large relative to historical norms. Given the expectation that collections would return to earth, revenue declines were built into the forecast, leaving the outlook very close to the Close of Session forecast for now.  Declines are expected to continue through the current fiscal year, further reducing annual revenues by around $50 million.

In addition to healthy General Fund revenue growth, Oregon Lottery sales and Estate taxes have been very strong as well. Recent collections have consistently come in above expectations.

Revenue growth in Oregon and other states will face considerable downward pressure over the 10-year extended forecast horizon.  As the baby boom population cohort works less and spends less, traditional state tax instruments such as personal income taxes and general sales taxes will become less effective, and revenue growth will fail to match the pace seen in the past.

See our full website for all the forecast details. Our presentation slides for the forecast release to the Legislature are below.

Posted by: Josh Lehner | September 12, 2016

Careful with the Data, Job Polarization and Housing Math editions

Ahead of Wednesday’s forecast release, two quick notes on items that caught my eye recently.

First, as our office has written quite a bit about in recent years, job polarization continues to shape the economy and labor market. That is, jobs are increasingly concentrated at the low- and high-ends of the wage spectrum with shrinking opportunities in middle-wage occupations. The Federal Reserve Bank of New York, who pioneered the local and regional polarization work our office’s uses, has a very useful update they are using in their presentations. One key point when it comes to polarization is that these jobs do not decline forever, they do grow in absolute terms during economic expansions. In fact, as the NY Fed’s graph shows, middle-wage jobs increased in absolute terms faster than both low- and high-wage jobs in recent years. This is good news!

uspolarnyfed

However this does not mean that job polarization does not exist. Middle-wage jobs should increase more in absolute terms given that they represent a larger share of all jobs. The problem with polarization is that middle-wage jobs decline the most in recessions and do not come back all the way during expansions. Thus as a share of the economy, middle-wage jobs are shrinking. This can be seen in the second graph which uses the exact same data and same categories but looks at growth rates instead. Clearly middle-wage jobs, while accelerating some, are still growing slower than both low- and high-wage jobs.

uspolar1015

The point here is that it is important to look at both levels and rates. One can potentially be mislead when looking at just one part. The NY Fed did not try to mislead and I am not accusing them of that. Rather, I just wanted to flesh out the story a bit further. I also teach a data analysis and presentation module at Willamette University and this provides a good, new example to bring to class. There is considerably more art and less science than many think when it comes to data analysis and presentation. You need to understand the whole picture to know which parts you want to emphasize in your work. And emphasizing the fact that middle-wage jobs do not decline forever and are even doing much better in recent years is certainly important to do. That point does tend to get lost in the polarization discussion.

Item two is more of a funny data note. Coldwell Banker Real Estate crunched some numbers on the average list price for 4 bedroom, 2 bathroom homes across the country. As the Portland Tribune writes, in Oregon the highest list price is in Lake Oswego and the lowest average list price is in Klamath Falls. From this one can conclude that LO is the least affordable and K Falls is the most affordable place in the state, with the caveat you are trying to buy a 4 bedroom, 2 bathroom home today. Just to check, I wanted to see how these list prices compared with family incomes in the area. It turns out that the list price to family income ratio is nearly identical. While there are a variety of reasons that homes are more expensive in Lake Oswego and less so in Klamath Falls, one of the reasons is income. Just an interesting note on housing and affordability, or lack thereof.

housingmath

 

Posted by: Josh Lehner | September 9, 2016

Graph of the Week: Housing Bust Metros Update

One of the defining features of the Great Recession is the housing bubble that preceded it and set the stage for the collapse. The regions of the county that experienced the biggest bubble, also experienced the largest fallout when it burst. One item our office has tracked over the years are the Housing Bust Metros which are the 50 metros with the biggest run-up in prices and subsequent declines, per the FHFA home price data. While much of the focus of the housing bubble was on the so-called sand states (AZ, CA, FL, NV) which experienced tremendous bubbles, unfortunately, two of the nation’s largest bubbles were here in Oregon. Bend and Medford’s experiences are right there with the worst of the worst in terms of the bubble and bust. In short, that’s not good.

In terms of the economic fallout, only 1 percent of the nation’s metros overall saw larger employment declines than Bend experienced and only 7 percent saw worst declines than Medford. This is certainly part of the story for why Oregon’s Great Recession was worse than the nation overall, besides our general volatility due to industrial structure and migration flows. And when a region suffers a decline like Bend and Medford a few years ago, it does not bounce back right away. The only thing comparable to these losses in Oregon’s modern history is what happened to Coos Bay in the 1980s. So, it takes awhile to adjust and recover. We know both Bend and Medford are growing again. Bend is off like a rocket once more, adding jobs at a 6-8 percent annual pace in recent years. Medford is seeing solid growth, if not spectacular.

All of this brings us to this edition of the Graph of the Week. A simple update to our housing bust metros graph. The typical housing bust metros saw employment declines that were twice as large as the rest of the nation. Medford was a little worse than that while Bend’s decline was nearly three times the rest of the country. In recent years, the housing bust metros have added jobs at a faster pace and are making up lost ground, even if that gap has not fully closed as of this summer.

HousingMSAs0716

When looking at all the various housing bust metros, it is not true overall that the farther you fell the stronger your rebound. This was clearly not a V-shaped recovery. In general, the farther you fell during the bust, the slower and weaker your recovery. There are a few exceptions here that have shown tremendous growth despite the severity of the recession. These outliers include Bend, in addition to both Cape Coral, FL and St. George, UT. Medford for it’s part is outperforming around 1/3 of these housing bust metros and has essentially regained all of its lost jobs today. While a bit slower than typical/historical growth in Medford, this performance outpaces the rest of the State of Jefferson. Stay tuned, I will have an economic update on the State of Jefferson in the near future.

Posted by: Josh Lehner | September 7, 2016

In The News: Private Education

It’s been more than three years since our office released an Oregon look at student loans, defaults and the economy. We are working on updating parts of the report, more in the near future. However the big education news this week is the closing of ITT Tech, following the closure of Corinthian College last year. One item that really stood out, or at least surprised us when we last looked at student loan defaults was that many of these proprietary (career and technical, by and large) did not have extremely high default rates. Yes, they were significantly above default rates from four year universities and even a bit higher than beauty schools, however below the culinary and art schools and community colleges. The graph below is an update using the latest data from the U.S. Department of Education.

default2012

Now, just because default rates are not exceptionally high does not mean they are great education bets. The biggest issue here is not only that some rely heavily upon federal student loans for their revenue, but also whether or not students actually complete the degree/training programs and whether or not such degrees/training actually improve labor market outcomes. That is, are these schools actually improving employment rates for their students and are the students earning higher wages after completion then they would have without the program? That is what we care about from an economic perspective. Clearly in some cases the answer is yes, however not always.

In terms of the outlook, this latest news raises an interesting question. IHS and some other macroeconomic forecasters have the outlook that private education employment will decline in the near future. In conversation with IHS their reasoning is due to things like the ITT Tech closure where some of these schools’ underlying business model falls apart. This has been their employment outlook for a number of years now, however with each passing quarter and year where employment does not fall, they simply shift out the decline. This may be the correct long-term view, it’s an interesting and open question. However it also has not been very accurate lately. Our office’s view is that these private sector education jobs will grow more in-line with population growth over time and school- and college-age population. There is more to these jobs than the career and technical institutes, as it includes private K-12 schools, private universities and the like.

edemp

Overall private education is a relatively small employment sector in Oregon and nationwide. The big news today is not whether or not these jobs will grow slowly or decline slowly in the future. The potentially big news is making sure that students actually graduate from their training programs and get better jobs than without the programs. That would be the best economic outcome and help with future growth.

Posted by: Josh Lehner | August 29, 2016

More on Prime-Age Workers – The Housing Bubble Edition

Earlier this summer we highlighted the ongoing challenges prime working age Oregonians without college degrees face. The decline of middle-wage jobs has significantly impacted both men and women alike. While some have found work in either high- or low-wage jobs, the vast majority of the adjustment has been an increase in nonemployment with most not even looking for work. It is true, however, that the stronger economy today is pulling some of these workers back into the labor force. Not all, and not even most, but some, which is still good news.

One item that got left on the cutting room floor of the previous work but is still very important is how the housing boom masked the longer-term structural decline in manufacturing. Kerwin Kofi Charles and Erik Hurst of the University of Chicago and Matthew Notowidigdo of Northwestern University have had a working paper along these lines for a number of years now. However they recently published an article in the Journal of Economic Perspectives that furthers their research.

The upshot of the work shows that the temporary boom in construction jobs helped to offset the loss in manufacturing jobs for prime working age males without college degrees. However the housing boom was a bubble and temporary. Once the bubble burst, the lack of employment opportunities for such workers became starker with the longer-term trends “unmasked” to a greater degree. From a broader perspective, the author’s discuss how this fits into the framework of reallocating workers and resources away from industries in structural declines. This process is not very well understood today. However the temporary housing boom was not all bad news. It did provide jobs for some workers, even if just for a few years, and did allow regional economies some time to try and diversify and invest in other sectors to support future growth. Obviously this did not happen everywhere or nearly enough, but is an interesting and important point the authors make.

The graph below is an Oregon version of the author’s national work, that shows the share of prime working age Oregon males employed in construction or manufacturing. There was a slow erosion from the 1970s through the 2000s, but not a big change overall. However since the Great Recession employment has fallen considerably in these occupations and nonparticipation has increased.

HousMfgOffset15

Four items of note relating to the outlook.

  1. Job polarization and the changing landscape of job opportunities is more structural than cyclical, or more permanent than temporary. Economists (rightfully) continue to call for higher levels of educational attainment in response. This goes beyond college degrees to include training programs, certificates, apprentices and the like.
  2. The best news for discouraged workers and those who do want a job is the tightening labor market. Businesses can be choosy when unemployment is high and they are flooded with applicants. Today they must broaden their hiring patterns to include the long-term unemployed or those without the perfect skills or training already.
  3. Middle-wage jobs are on the upswing today. They are unlikely to full regain their share of the economy overall but they are growing in absolute terms. This is particularly the case for construction workers and teachers which were hit disproportionately hard this business cycle.
  4. Unfortunately, some of the damage done is permanent. This is one reason our office’s baseline outlook for labor force participation never gets all the way back to where it was, even after controlling for the aging population.
Posted by: Josh Lehner | August 24, 2016

Oregon’s Tightening Labor Market

We know Oregon’s economy is booming today. Job growth is outpacing the typical state by a considerable margin. These gains are strong enough to make up the recessionary losses and keep pace with population growth. As labor becomes scarce in a tight market, wages rise. Businesses must compete more on price to attract and retain the best talent. One positive result of these dynamics is the growing labor force and increasing participation rate as more Oregonians look for work.

Even as all these good things are happening, a common question from businesses and in terms of the macro outlook is “where is the labor going to come from?” Our office’s view is that the stronger economy will continue to pull Oregonians into the workforce, in addition to the influx of young working age migrants. If you dig into the job opening surveys themselves, they show that a lot of the underlying difficulty in filling positions isn’t just about the number of applicants but also things like requiring experience and not training workers plus low wages, odd hours and the like. All that said, it does not mean there cannot be issues in specific industries or regions of the state, however.

Take the case of low-wage workers for example. As the Wall Street Journal reports, across the nation low-wage workers are seeing the strongest wage gains today (admittedly after a long spell of no gains). This is the result of businesses realizing they need to raise wages to get workers in a tighter market. The WSJ highlights the growing number of large corporations, like JP Morgan Chase and McDonalds, that have announced higher pay levels for their workers. However this is happening in Oregon as well. Two weeks ago the Governor’s Council of Economic Advisors took a trip to Newport to meet with community leaders and local businesses (more on the trip soon). One interesting topic was that of the new minimum wage law. Laura Anderson, owner of the fantastic Local Ocean Seafoods restaurant and fish market, noted how she and other businesses were initially worried about the new law and increased business costs. However, as the economy gets tight, wages do rise. Laura noted that today on the coast the effectively minimum wage is $11 per hour. Anecdotally this can be confirmed by the giant banner hanging outside the Newport Taco Bell advertising they are hiring, starting at $11 per hour.

All of this is to say that while Oregon is approaching full employment, we do not have great measures of full employment itself. It is more of a concept than a hard calculation. That doesn’t mean we don’t try. That is the entire purpose behind our Total Employment Gap work. Another, simpler and easier-to-understand way to gauge economic slack is to look at the number of unemployed per job opening. How large is the pool of available workers relative to what businesses need? Here, too, labor market slack is diminishing or potentially gone based on the historical patterns. This is true even if you add back in the “missing” workers who dropped out of the labor force.

UnempJobRatio0716

There are myriad reasons this matters for the economy but I will highlight two interrelated items. First, full employment matters for businesses because it does become harder to attract and retain workers when labor is scare. Second, a stronger economy and tighter labor market is great for workers as wages rise. One of the biggest issues with stagnant wages in the 2000s was the fact that the economy never fully tightened. Even with the housing bubble, the mid-2000s expansion was too short and too lackluster for the economy to reach full employment in many places, Oregon included.

This also matters for our office’s forecast. Oregon’s gains of 5,000 jobs per month over the past couple of years is not a sustainable rate. Those are peak growth rates. They eat up the economic slack. However as the economy approaches and reaches full employment, growth will slow to a sustainable rate. Right now our estimates show that Oregon needs about 2,000 jobs per month to keep pace with population growth. The exact timing of this transition, or slowing is an open question that we regularly discuss with our advisors. It must also be pointed out that the economy does not typically transition to sustainable rates of growth. It usually slams down into recession and the cycle starts anew. That said, there are not a lot of worrisome signs on the horizon right now and our advisors remain bullish.

Note: We are using our office’s blended help wanted ads figures which combines historical newspaper ads with today’s online help wanted. This is important to be able to look at historical patterns. Even as the online help wanted ads data starts in 2005, newspapers were still important than. So simply using just the online data from 2005 through today can be misleading.

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